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ServiceNow (NOW) Outpaces Stock Market Gains: What You Should Know

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ServiceNow (NOW) closed the most recent trading day at $484.36, moving +1.86% from the previous trading session. This change outpaced the S&P 500's 1.06% gain on the day. Meanwhile, the Dow gained 1.05%, and the Nasdaq, a tech-heavy index, added 0.55%.

Coming into today, shares of the maker of software that automates companies' technology operations had lost 5.8% in the past month. In that same time, the Computer and Technology sector lost 8.63%, while the S&P 500 lost 8.3%.

ServiceNow will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $1.68, up 18.31% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $1.77 billion, up 25.45% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $7.31 per share and revenue of $7.42 billion, which would represent changes of +23.48% and +25.94%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for ServiceNow. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. ServiceNow is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that ServiceNow has a Forward P/E ratio of 65.02 right now. Its industry sports an average Forward P/E of 17.08, so we one might conclude that ServiceNow is trading at a premium comparatively.

Also, we should mention that NOW has a PEG ratio of 2.27. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Computers - IT Services was holding an average PEG ratio of 0.89 at yesterday's closing price.

The Computers - IT Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 96, putting it in the top 38% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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